Mr. Cope monitors the development of U.S. tax law daily through postings on government websites, daily tax publications, monthly tax journals, tax newsletters, tax conferences and meetings of professionals organizations in New York and Washington. Each month he publishes the Tax Insights Blog, which describes and analyzes significant U.S. tax developments (e.g., judicial decisions, regulations, proposed tax legislation) having cross-border tax consequences. The blog's content should be of interest to U.S. businesses with foreign operations and businesses headquarted outside the United States with U.S. investments or U.S. operations.
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The Congressional Research Service Reports on Consumption Taxes
January 2014A recent report by the Congressional Research Service examines the potential consequences of the United States adopting a consumption tax as part of comprehensive tax reform legislation. The report is of interest because it describes some economic benefits of adopting such a proposal. It also discusses the groups of taxpayers that would benefit or be disadvantaged if a consumption tax were to be adopted.
Patent Box Debuts in Washington in July
July 2015Although the U.S. Congress has not been particularly attentive to the Base Erosion and Profit Shifting (“BEPS”) project of the G-20 and the OECD in the past, recent developments in Washington suggest Congressional attitudes may be changing. The International Tax Bipartisan Tax Working Group of the Senate Finance Committee issued its report (the “Report”) on July 7, 2015. The Report recommends, inter alia, that the United States adopt an “innovation box.” In addition, on July 28, 2015, Rep. Charles Boustany, Jr. (R-La.) and Rep. Richard E. Neal (D-Mass.) introduced a discussion draft of patent box legislation – the “Innovation Promotion Act of 2015 – which would provide for a reduced rate of tax on “innovation box profit.”
Corporate Tax Reform and Choice of Business Entity
April 2015A recent report by the Joint Committee on Taxation provides data on the entities through which business is conducted in the United States. The data are significant in the context of the debate over corporate tax reform, because they support the view that legislation aimed solely at corporate tax reform is unlikely to win wide political support from the U.S. business community.
International Tax Reform Considered by Senate Finance Committee
March 2015On March 17, 2015, the Senate Finance Committee held a two-hour hearing on reforming the provisions of the Internal Revenue Code dealing with the taxation of cross-border income. Four individuals testified at the hearing: Pam Olson an attorney with PricewaterhouseCoopers holding the title United States Deputy Tax Leader & Washington National Tax Services Leader, Anthony Smith, Vice President of Tax & Treasurer of Thermo Fisher Scientific Inc., Rosanne Altshuler, Professor of Economics and Dean of Social and Behavioral Sciences of Rutgers University, and Steve Shay, Professor of Practice of Harvard Law School. Olson and Shay have held senior positions in the Treasury’s Office of Tax Policy in the past. Although international tax reform has been discussed for year in Washington and no substantive legislation has been enacted, the current discussion may build a consensus that will lead to legislation, most likely after the next Presidential election in 2016.
The materials prepared for the hearing and the hearing itself identified various factors providing an impetus for international tax reform in the United States as well as the policy issues to be addressed in crafting tax legislation to respond to those factors. Although the Senate Finance Committee has not yet drafted a legislative proposal, the questions asked by the senators during the hearing as well as their comments provide some insights as to the broad outlines of any bipartisan legislation that may follow.
Joint Committee on Taxation Estimates Federal Tax Expenditures for 2014-2018
August 2014On August 5, 2014 the staff of the Joint Committee on Taxation released a report entitled estimates of federal tax expenditures for fiscal years 2014-2018. The report is of interest because discussions of U.S. corporate tax reform often center on reducing the U.S. corporate tax rate while expanding the corporate tax base. An expansion of the corporate tax base would ordinarily result in a reduction in corporate tax expenditures.
U.S. Senate’s Hearing on Caterpillar Highlights U.S. Multinationals’ Tax Conundrum
April 2014The U.S. Senate’s Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs (the “Subcommittee”) issued a report on April 1, 2104 entitled Caterpillar’s Offshore Tax Strategy (the “Report”). The Report is the result of an extensive inquiry by the Subcommittee’s members and staff, including a public hearing held on April 1, of a business restructuring implemented by Caterpillar beginning in 1999. The Report includes responses to the Subcommittee by Caterpillar, Caterpillar’s auditor, PWC, and expert reports and testimony. The Report, which runs 95 pages, is worth reading because it catalogs in some detail the issues that U.S. multinationals face when implementing a business restructuring that increases their offshore presence while deferring income that would otherwise be subject to current U.S. tax. The final part of this article addresses the tax conundrum that successful US companies, such as Caterpillar, face in today’s tax environment and how some have addressed it.
President Obama’s Budget Would Tighten U.S. Subpart F Rules
March 2014On March 4, 2014, the Obama administration released its fiscal 2015 budget. The revenue proposals of the budget are contained in in a document commonly referred to as the Green Book. The 2015 Green Book, which contains 297 pages of proposed tax increases and tax expenditures, includes 17 international tax reform proposals that would significantly raise taxes on U.S. multinationals. While the proposals are unlikely to garner much political support in the near future, some of them may enter into the mix of any political compromise needed to fund a revenue neutral reduction in the corporate tax rate – should serious corporate tax reform discussions materialize after the Congressional elections in the fall.
Chairman Camp’s Latest Tax Reform Proposal
February 2014On February 26, 2014, Representative Dave Camp (Rep. MI), the Chairman of the House Ways and Means Committee, released a bill to reform the Internal Revenue Code, entitled “The Tax Reform Act of 2014.” The bill, which is labeled a discussion draft, is a more comprehensive version of a discussion draft of a tax bill released in 2011. The bill, if it were to become law, would significantly change U.S. international tax rules.
New Economic Studies Likely to Influence Corporate Tax Reform Debate
January 2014On January 6, 2014, The Congressional Research Service (CRS) issued two reports to Congress that are likely to influence the corporate income tax reform debate in the United States. One report addresses differences in corporate tax rates among countries, and a second report addresses various economic considerations arising from reducing the U.S. corporate tax rate and increasing the corporate tax base. Both reports contain numerous implications for corporate tax reform.
Senator Baucus Offers Discussion Draft for Comprehensive International Tax Reform
November 2013On November 19, 2013, Senator Max Baucus (Dem, MT), Chairman of the Senate Finance Committee, released a discussion draft of international business tax reform legislation (the “discussion draft”). As we have discussed in earlier posts, the Senate Finance Committee previously had released a series of "tax reform option papers" identifying various tax issues. The committee now is releasing a series of “discussion drafts” presented as bills in draft form to amend current law. International tax reform was the first topic released. The staff of the Joint Committee on Taxation also prepared a "technical explanation" of the discussion draft. We review the current state of international corporate tax reform and then discuss some highlights of the discussion draft as well as some of its possible implications.
Senator Levin Reacts to BEPS
September 2013In earlier posts we have discussed the activities of the Permanent Subcommittee on Investigations (the “Subcommittee”) of the U.S. Senate Homeland Security and Government Affairs Committee, which is chaired by Senator Carl Levin (Democrat, Michigan ), including the Subcommittee's hearings on tax planning carry out by various U.S. multinationals. We have also noted the ongoing work of the OECD and the G-20 countries in combating BEPS -- base erosion and profit shifting -- and mentioned the muted U.S. response to that effort so far. Senator Levin has proposed legislation to respond to BEPS.
Recent Developments in U.S. Tax ReformJune 2013This posts reviews developments in the movement for U.S. corporate tax reform in June 2013
U.S. Senate Subcommittee Holds Hearings Criticizing Apple’s Tax Planning
May 2013On May 21, 2013, the Permanent Subcommittee on Investigations (the “Subcommittee”) of the U.S. Senate Homeland Security and Government Affairs Committee held a hearing that examined how Apple Inc. “has used a variety of offshore structures, arrangements, and transaction to shift billions of dollars in profits away from the United States and into Ireland, where Apple has negotiated a special corporate tax rate of less than two percent.” The hearing included testimony by Apple’s CEO, Tim Cook, the U.S. Treasury’s Assistant Secretary for Tax Policy, Mark Mazur, an IRS official responsible for transfer pricing enforcement, and others. The subcommittee and some of those testifying made specific recommendations for tax reform.
The Obama Administration Releases Its Fiscal Year 2014 Budget
April 2013On April 10, 2013, President Obama delivered his administration's proposals for the federal government's 2014 budget to the U.S. Congress. The budget addresses both federal spending and federal revenue (i.e., taxes). Each year, the tax proposals included in the budget are published separately in a book with a green cover, which is referred to colloquially as the "Greenbook." This year's Greenbook has two main components: (i) a traditional budget proposal, i.e., proposed tax increases, and (ii) a framework for revenue-neutral tax reform.
Ways and Means Tax Reform Proposals Would Affect Non-U.S. Persons
January 15, 2013Over the last couple of years, Dave Camp (Republican, Michigan), the chairman of the House Ways and Means Committee has released discussion drafts of several bills addressing reform of various part of the Internal Revenue Code. As discussed in our December 2011 column, in October 2011 Chairman Camp introduced a discussion draft of a bill addressing international tax reform that would move the United States to a territorial system for the taxation of foreign income. More recently, in January 2013, Chairman Camp released a discussion draft of a bill that would reform the taxation of derivatives and other financial products. The Ways and Means Committee held hearings on that bill in March. Also, in March Chairman Camp released a discussion draft of a bill addressing small business tax reform. Even though the prospect for bipartisan action on tax reform does not appear rosy at this time, Chairman Camp hopes to stimulate serious discussion of significant U.S. federal income tax policy and technical issues and build consensus for change over the longer term.